Interministerial panel proposes central law to govern online gaming
The electronics and information technology ministry set up IMTF and its report includes recommendations from the Union ministries of home, sports and youth affairs, information and broadcasting, finance, law, and consumer affairs
An Interministerial Task Force (IMTF) set up to explore new regulations for online gaming has recommended central legislation to govern it, calling the Public Gambling Act of 1867, which currently covers it, incapable “of covering/defending/dealing” with digital-based activities and the emerging technologies associated with it.
“Moreover, since we are in the process of replacing all obsolete laws, it becomes all the more important to replace the existing law(s) with new legislation that will not only cover the entire gamut of technology and internet-based gaming but would also provide coverage for extraterritorial jurisdiction which is completely missing at present,” IMTF said in its report submitted to the Prime Minister’s Office in September.
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The report cited inconsistencies in the state laws regarding online gambling while backing central legislation. It said an online gaming platform must not allow or facilitate transactions through unauthorised payment systems and encourage or facilitate any money laundering activities financing of terrorism activities or transactions in violation of the Foreign Exchange Management Act, etc.
The report noted Public Gambling Act (PGA) is a pre-internet era law and acts as a model law state governments may or may not adopt. “The PGA recognizes the distinction between games of skill and games of chance. Games of skill are specifically exempted from the scope of the PGA...PGA does not apply to games of skill.”
The report noted many state governments have adopted Public Gambling Act as it is but some have also introduced their own legislation. “Some state laws provide for a licensing mechanism for online games, such as Nagaland, Meghalaya, and Sikkim. Some states have prohibited both online games of chance and skill involving any real money element...Andhra Pradesh, Telangana, and Odisha.”
The report called a lack of a uniform regulatory approach for online gaming in state laws a cause for concern. It added some state governments follow Public Gambling Act and allow real money games of skill while others have sought to prohibit both games of skill and chance even as Supreme Court recognised the fundamental right to trade for games of skill.
“This creates an uncertain regulatory environment for online gaming companies, which are forced to use technologies such as geo-fencing as their games may be legal in some states, and illegal in others.”
Karnataka, Kerala, and Tamil Nadu passed laws to prohibit both online games of skill and chance but they were challenged in high courts and held to be unconstitutional.
Karnataka and Tamil Nadu’s petitions challenging the decisions of high courts are pending in the Supreme Court. The gaming law of Andhra Pradesh has also been challenged in the high court.
Some states are in the process of framing their laws, which may add to the inconsistencies among state gambling laws. Rajasthan released a draft law in June for comments and only sought to regulate online fantasy sports and Esports. Telangana is also framing its regulatory framework. High courts have also given differing judgements on the legality of a certain type of online game.
The report noted the Gujarat high court held poker to be a game of chance and hence illegal. The Calcutta high court declared it to be a game of skill and legal. “This has resulted in different legal positions in different states for the same... game.”
The report cited the panel’s consultations with state governments and said they were concerned about their limitations in effectively regulating online gaming. It added they highlighted limitations such as a lack of clarity on the classification of games of skill and games of chance.
The reports said state governments said there was also a lack of guidance on what parameters should be used to determine what qualifies as a game of skill or chance. “There is no central regulatory body to assess whether a particular game is a game of skill or chance.”
In its inputs, the Union home ministry said regulation of betting and gambling under a central law should be examined. The department of legal affairs said gambling and betting are state subjects. It cited multiple entries in the Union List in the Constitution under which the Centre can regulate online gambling and betting.
Government think tank NITI Aayog also backed a central law to bolster economic growth and innovation in the industry. It also called for the development of a regulatory framework to quickly address grievances for online gamers involving money.
The report said state governments find it difficult to implement and monitor geo-fencing measures to ensure that no user within their territorial jurisdiction is accessing an illegal form of gambling or gaming. “Additionally, state laws cannot empower State Governments to block offshore betting or gambling websites which are illegal.”
The report noted there is no central law to tackle offshore illegal gambling sites.
It said the power of the Centre to block websites is restricted. “State laws do not have extraterritorial applicability to block these sites.”
The report proposes a uniform law to determine what forms of online gaming are allowed. It has sought the elimination of the inconsistencies between the laws of different states and to have a single body to address issues pertaining to online gaming.
The report has recommended the introduction of player protection requirements for online gaming platforms that are uniform across all states.
IMTF highlighted the World Health Organization’s declaration of “gaming disorder” as a behavioural addiction in 2019. It noted the National Commission for Protection of Child Rights in 2021 outlined the harms children affected by the disorder suffer.
The electronics and information technology ministry set up IMTF and its report includes recommendations from the Union ministries of home, sports and youth affairs, information and broadcasting, finance, law, and consumer affairs.
IMTF was mandated to cover online gaming or games of skill including real money games of skill. Online gambling was excluded from its scope since betting and gambling are state subjects.